Abandon restrictive IMF policies

Abandon restrictive IMF policies

Uganda’s economy is on its knees. Poverty, runaway unemployment and the collapse of the shilling as well as huge tax revenue shortfalls by Tax collectors are just but the signs of a stagnated economy. Uganda’s economic technocrats appear to agree that the economy has stalled and needs an urgent overhaul if it is to keep pace with the demands of the rapidly rising population.

Unfortunately, a recent event organized by the Bank of Uganda and the International Monetary Fund officials represents a huge misunderstanding among our leaders of the problem we face.

When one looks at suggestions tabled to revive the economy, you get the feeling that they’ve not learned anything from history. They’ve suggested things like broadening the tax base, cutting government expenditure and tightening monetary policy.

For the start, all these suggestions fit into IMF’s economic rule book of private sector-led growth and they have been proven a failure in Uganda. As many will recall, IMF’s monumental mistake in Uganda was to call for the massive privatization of public enterprises that ended up into the hands of connected few individuals and foreigners.

What Uganda needs now is not less but more government expenditure to support agriculture which would boost exports, provide skills training for the millions of graduates who are idle and unemployable so they can get jobs in the emerging oil and agriculture small scale industries.

The proposal to further tighten monetary policy is a proven non-starter for Uganda. Bank of Uganda’s tight monetary stance implemented over the past two decades has succeeded by denying the private sector access to credit from commercial banks because they are too eager to invest in government securities at the expense of more risky farmers. Ugandans need to access credit more easily from development banks.

When you hear a suggestion that Uganda needs to expand its tax base – meaning that more people need to come into the tax-payers bracket, you will shudder.

With high taxes already paid on Pay as you Earn, VAT, and Fuel, ordinary Ugandans can be expected to shoulder a higher burden. What government needs is to bring an end to the absurd tax exemptions regime that lifts the burden off the richest foreigners onto poor Ugandans.

What Uganda needs now is a robust plan that will revive agriculture by focusing on high-dollar value exports, empower farmers through supporting development of cooperatives, make the rich meet their tax obligations.

The government further needs to cut the size of government and quickly embark on an aggressive campaign to impart handy skills into young people so that they can reap the benefits of agricultural transformation as well as oil exploitation.

But the new economic model will need to be debated broadly with the view to incorporating the ideas and buy-in of different stakeholders. This should be followed by a widely shared monitoring and evaluation mechanism to ensure that decisions are implemented with set targets.

Short of these the recommendations made by IMF so far, will make Uganda a permanent beggar and will not transform.